Payroll and Benefits Guide - Luxembourg

Luxembourg
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Currency

Euro (EUR)
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Capital

Luxembourg City
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Employer Taxes

12.22% – 15.30%
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Date Format

dd/mm/yyyy
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Fiscal Year

1 Jan – 31 Dec

Fun Facts

Luxembourg is the only remaining grand duchy in the world, with a reigning grand duke or duchess as its head of state.

Luxembourg has three official languages: Luxembourgish, French, and German. English is also widely spoken.

Luxembourg is one of the world’s wealthiest countries, with a high standard of living and a strong economy

Luxembourg City is known for its picturesque old town and impressive fortifications.

Luxembourg has a low crime rate and is considered one of the safest countries in the world.

Luxembourg has a significant wine industry.

Luxembourg

Contributions

Employee Payroll Tax

Contribution TypeRate
Pension8.00%
Health Insurance2.80% to 3.05%
Dependency Contribution1.40%

Employer Payroll Tax

Contribution TypeRate
Pension8.00%
Health Insurance2.80% to 3.05%
Accident at Work0.68% to 1.13%
Mutual Health Benefit0.60% to 2.98%
Health at Work0.14%

Payroll

Payroll Cycle

The typical payroll frequency in Luxembourg is monthly, while some businesses pay weekly. Payment is often made on the final day of the month or week for work performed between the first and last days.

13th Salary

It is traditional to pay the thirteenth wage in Luxembourg. At the end of the year, employees receive their 13th paycheck, which is equal to one month’s pay. Additionally, it is customary for businesses to pay an extra half-month’s compensation.

Work Hours and Week

In Luxembourg, a typical workweek consists of 40 hours, or 8 hours every day.

Overtime

Every hour worked that exceeds the weekly minimum wage must be compensated as overtime and be in accordance with any applicable employment contracts, collective bargaining agreements, etc. Before beginning any overtime working hours, it must also be jointly agreed upon by the employer and employee and reported to the labor authorities.

The maximum amount of overtime is typically 2 hours per day and 8 hours per week.

The rate of remuneration for overtime hours is 150% of the regular wage rate.

Sunday work is not allowed, unless specifically permitted or for a particular sector, in which case special pay should be provided.

Luxembourg

Leave

Paid Time Off

A minimum of 26 working days of paid time off are given to employees each year. Additionally, certain workers get extra time off automatically:

  • Additional 6 days of leave for people who are disabled or were injured at work
  • 3 extra days of vacation for mining workers
  • An employee or apprentice who has not had a rest period of 44 hours per week for an uninterrupted length of time must take one extra day every 8 weeks.

The collective bargaining agreements or the employers may offer more paid vacation days.

Public Holidays

Workers must be paid for public holidays that fall on weekends by receiving a day off in lieu of employment within three months of the holiday.

Sick Days

There is a 26-week maximum paid sick leave. Throughout a 12-month period, the employer pays the entire wage up until the 77th day of sick leave, whether those days are consecutive or not. The insurance provided by the employers’ mutual program will cover 80% of this compensation. After the 77th day, Social Security will start covering further leave.

Maternity Leave

In Luxembourg, maternity leave lasts for 20 weeks and can start up to 8 weeks before the due date. The lady must have had the required health insurance for at least six of the previous twelve months prior to maternity leave in order to be eligible. The lady must also inform their workplace at least 12 weeks before to the anticipated due date.

Maternity leave is paid for by social insurance, which has a maximum limit of five times the minimum salary and cannot be lower.

Paternity Leave

The collective agreement or work contract specifies paternity leave, which often lasts up to 10 days. At least two months before the planned departure, the parent must inform their workplace. If not, this leave can be shortened to two days. Additionally, this leave can be used within two months of the child’s birth and does not need to be used consecutively.

Parental Leave

In Luxembourg, parental leave is based on the employee’s hours worked and the kind of contract. The employee must have worked a minimum of 10 hours per week and have been registered with social security for at least 12 consecutive months at the time of the birth or adoption in order to be eligible.

Although the company does not pay for this time off, the Children’s Future Fund does. Only one parental leave per kid may be used, and it must be used before the child is six (12 for adopted children). Based on the amount of hours specified in the employee’s contract or collective bargaining agreement, the leave may be taken in full, in part, or jointly with the other parent:

  • 4-6 months of full-time leave, 8-12 months of part-time leave (50 percent of regular working hours), 4 periods of 1-month leave within 20 months, and 1-2 half days of leave every week during 20 months are all possible for a full-time worker who works 40 hours per week.
  • Working at least 20 hours per week, a part-time employee is eligible for 4-6 months of full-time leave and 8–12 months of part-time leave (50 percent of normal working hours).
  • 4-6 months of full-time leave for a part-time employee who works at least 10 hours per week.
  • Paid employees—must have put in at least 10 hours a week of labor

Termination

Termination Process

The method of termination varies depending on the type of contract and the cause for termination, as well as how the employment agreement and collective agreement are in place.

Before an employee is fired by a business with more than 150 employees, a hearing must be held. Employers with at least 15 workers must inform the economic committee of the termination.

Notice Period

Notice periods may be covered by clauses in collective agreements. Imagine that the notice periods mentioned in the collective agreement are different from the notice periods required by law. In that situation, both the employer and the employee are required to abide by the collective bargaining agreement’s specified notice periods.

The length of service affects the amount of notice:

  • Two months’ notice is necessary for workers with fewer than five years of service.
  • Four months’ notice is necessary for workers with between five and 10 years of service.
  • Six months’ notice is necessary for workers with more than 10 years of service.

If the termination letter is sent before to or on the first of the month, notice will start on the 15th. If the letter of dismissal was sent between the 15th and the final day of the month, notice will start on the first day of the next month.

Additionally, payment in lieu of notice is an option.

Severance Pay

The amount and calculation of severance compensation may be covered by clauses in collective bargaining agreements. Employer and employee are required to follow the collective agreement’s severance compensation procedure if it differs from the approach described elsewhere.

The length of work affects the amount of severance pay:

  • Less than five years: No severance compensation
  • For firms with less than 20 employees, between five and ten years: one month’s severance compensation or an additional five months of notice.
  • For workers with less than 20 employees who have worked for the company for between 10 and 15 years, the notice period may be extended by eight months.
  • 15-20 years: 3 months’ severance compensation, or for businesses with less than 20 workers, the notice period may be extended by nine months.
  • 20–25 years–6 months of severance compensation, or for businesses with less than 20 workers, an additional 12 months of notice.
  • 25–30 years: 9 months of severance compensation, or a 15-month notice extension
  • 30+ years: 12 months of severance compensation, or an additional 18 months of notice.

Probation Period

Probation Period

In Luxembourg, the employee’s wage and level of qualification largely define the length of the probationary period, which is typically two weeks:

  • The maximum probationary term is one year if an employee gets a monthly pay of at least 4,586.12 EUR.
  • The maximum probationary term for a worker who possesses a vocational skills certificate or an equivalent is six months.
  • The employee’s maximum probationary term is three months if they don’t have a vocational skills certificate or an equivalent.

Immigration

For employment in Luxembourg, citizens of the EU, EEA, and Switzerland do not require a work visa. For their first year in Luxembourg, residents of Europe with Croatian citizenship must still get a separate work permit.

Within one week of arrival, anybody planning a stay in Luxembourg longer than 90 days must go to the local municipal office to report their arrival and desire to stay. Additionally required is an address registration certificate.

Any foreign national seeking to work in Luxembourg for more than 90 days must apply for a work visa.

VAT

Luxembourg’s VAT rates for 2023 are as follows:

  • 16% – standard VAT rate.
  • 13% – intermediary VAT rate.
  • 7% – reduced VAT rate.